Final answer:
The insurance policy of the vehicle owner, Elaine's Nationwide coverage, pays out first in the event of an accident involving her car. If the costs exceed Elaine's policy limits, then Sadie's insurance with Progressive may contribute. This situation exemplifies the shared risk model inherent in automobile insurance.
Step-by-step explanation:
In the scenario where Sadie borrowed Elaine's Subaru and was involved in an accident resulting in severe injury and a total loss of the vehicle, the primary insurance to pay first would typically be the insurance of the vehicle owner, which in this case is Elaine's policy with Nationwide. The insurance policy on the car will be the primary coverage, and Sadie's policy with Progressive would serve as secondary coverage if needed. In the event of bodily injury, the liability coverage from the owner's policy should cover the expenses up to the policy limit. However, since Sadie's bodily injury loss exceeds this limit, her own insurance may also contribute after the limit on Elaine's policy is reached.
The simplified example of how automobile insurance works, demonstrates how insurance operates on a shared risk model, where all insured parties contribute to a pool, which is then used to pay for the losses of the few who have claims, effectively distributing the costs of risks across all policyholders.